[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Govt not using full strength to restore macroeconomic stability

The government is not moving at full throttle in bringing discipline to the banking sector, implementing reforms wholeheartedly, taking measures against syndication, and bringing money launderers under the rule of law, said a top economist.

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Govt not using full strength to restore macroeconomic stability

Mustafizur Rahman, distinguished fellow of CPD

The government is not moving at full throttle in bringing discipline to the banking sector, implementing reforms wholeheartedly, taking measures against syndication, and bringing money launderers under the rule of law, said a top economist.

Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), said the government is taking various steps and embracing reforms to mitigate challenges in the economy and lower inflation.

"My concern is that they are not going at full strength. They are going one step forward, two steps backward," he added.

"I see half-hearted initiatives, but taking the steps to its logical conclusion is not there because that will hurt a number of people. Whether it will harm those people is at the end of the day a political decision."

According to Rahman, macroeconomic management, good governance, reforms, and zero tolerance to all forms of anomalies will be required if the upcoming budget is to achieve its objective of macroeconomic stability and bringing down inflation.

The former professor of accounting said the budget should look at the pressure heaped on marginalised groups, fixed-income groups and low-income people, and how they can be helped through budgetary allocations, fiscal policies and fiscal incentives.

He requested the government go a bit slow on transport infrastructure. However, the priority should be to complete ongoing projects rather than taking up new ones.

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[Saif]

Power, agriculture to drive up subsidies

The subsidies and incentive expenditures in the upcoming budget are going to be more than that of the current fiscal year.

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Power, agriculture to drive up subsidies

The subsidies and incentive expenditures in the upcoming budget are going to be more than that of the current fiscal year.

The subsidies are mainly increasing in the power, energy, and the agriculture sectors.

Even though the government plans to raise power tariffs four to five times a year, the highest subsidy allocation is likely to go towards the electricity sector.

Finance ministry officials said the increased subsidy allocation was largely due to the arrears in the power and agriculture sectors.

In the upcoming fiscal year, which begins on July 1, the subsidy allocation is likely to be Tk 1,12,000 crore, up from Tk 1,00,174 crore in the outgoing fiscal year.

Of the sum to be set aside for 2024-25, the power sector is likely to get Tk 42,000 crore. The government has earmarked Tk 35,000 crore for 2023-24.

Before 2021-22, the subsidy allocation for the power sector was between Tk 7,000 crore and Tk 9,000 crore.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, said the main reason behind the rising subsidy allocation in FY25 is the higher energy prices in the international market and elevated capacity payments.

He said the government has planned to increase power tariffs several times, but the sector will require more subsidies as more power plants, including Rooppur nuclear plant, are ready to produce electricity.

"If the old and inefficient power plants are not phased out, the overall capacity charges will increase, which will deepen the subsidy burden," he told The Daily Star.

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[Saif]

Trade-off between macro-economic stability and growth

Is there a paradox between growth and macro-economic stability? In normal circumstances they are considered complementary-one reinforcing the other; but asking which comes as the foremost priority may lead to answers that would tend to vary from place to place reflecting the various dimension

thefinancialexpress.com.bd

Trade-off between macro-economic stability and growth
WASI AHMED
Published :
Jun 04, 2024 23:16
Updated :
Jun 04, 2024 23:16

Is there a paradox between growth and macro-economic stability? In normal circumstances they are considered complementary-one reinforcing the other; but asking which comes as the foremost priority may lead to answers that would tend to vary from place to place reflecting the various dimensions characterising economies. Is it appropriate to say that while macro-economic stability of a country is the precondition for economic growth, the latter may not necessarily be indicative of the former? The trade-off between the two is not simple enough.

Macroeconomic stability can be defined and measured in different dimensions including real, nominal and external stability. To speak of the most important one, real stability is related to sustained and stable growth in economic activity and employment, and is measured by business cycle indicators, such as the unemployment rate or the output gap. Macroeconomic stability is often considered a buffer against currency and interest fluctuations in the global market. Exposure to currency fluctuations, large debt burdens, and unmanaged inflation can cause economic crises and a collapse of GDP. It is here that macro-economic stability features as the foundation of an economy. Economists consider five variables to measure macro-economic stability. These include low and stable inflation, low long-term interest rates, low national debt relative to GDP, low deficits, and currency stability.

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[Saif]

A wounded economy, another perilous year

It’s not the best of times. It’s not the season of light. The future will tell whether it’s the period of Dickensian despair on the economic front. But this is not the moment for business as usual, for sure.

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A wounded economy, another perilous year
Abul Hassan Mahmood Ali unveils fiscal goals in his maiden budget in parliament today. Will he be able to fix the precarious state of the economy?

It's not the best of times. It's not the season of light. The future will tell whether it's the period of Dickensian despair on the economic front. But this is not the moment for business as usual, for sure.

The cycle of economic exhilaration that portrayed Bangladesh as a stellar performer in Asia for a decade is no more on the steady ground that it once was. A triad of crises is now seeping into every corner of the economy. Inflation is an index of chronic consumer pain. The exchange rate shock is hurting almost everyone. Foreign exchange reserves are still haemorrhaging -- half a billion dollars per month.

A sea of red ink appears on the horizon as almost all indicators depict a gloomy picture. GDP growth has come down from its exuberant peak. Stock prices continue to drift downward. Most banks, save for a dozen, are lurching in and out of fund shortages. The zombie banks kept alive for too long are dragging the sector down.

Is the economy becoming a chronic patient? Perhaps not. But it's grievously bruised and needs to be healed and fast.

Years of stability lulled us into believing everything was perfect. People in almost every sphere became habituated to an equilibrium of low inflation, low interest rates and low exchange rate volatility. Under this apparent calmness was a layer of stress.

Then the global crisis came more as a trigger than a cause, exposing Bangladesh's vulnerabilities. Now the tinted perception of the economy is wearing off, acceptance of which we are resisting.

The new fiscal year starting in July could be another perilous year amid a confluence of global economic headwinds and the lingering effects of the government's past misguided steps.

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[Saif]

Govt to rely more on local banks than foreign funds

The government will rely more on domestic bank borrowing than foreign financing in the next fiscal year, intensifying pressure on the economy.

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Govt to rely more on local banks than foreign funds

The government will rely more on domestic bank borrowing than foreign financing in the next fiscal year, intensifying pressure on the economy.

In the revised budget for the current fiscal year of 2023-24, the net foreign financing was cut by 25 percent due to the increasing debt servicing cost and low utilisation of foreign funds.

Net foreign financing is calculated after excluding the expenditure on debt servicing.

The net foreign financing is likely to be reduced by 12 percent in 2024-25. In the current fiscal year, Tk 1,02,490 crore was allocated as net foreign financing, which was later reduced to Tk 76,293 crore.

The amount will be Tk 90,700 crore in FY25.

In the revised budget, the allocation for debt servicing has increased by 2.7 percent to $3.82 billion, including principal amount and interest payments. The expenditure climbed 13.8 percent due to the depreciation of the taka and stood at Tk 42,200 crore.

When the budget was placed last year, an exchange rate of Tk 99.46 per dollar was used. An exchange rate of Tk 110 per dollar has been taken into consideration in the case of the revised budget of FY24 and the proposed budget for FY25.

On May 8, the central bank, however, fixed Tk 117 as the mid-rate as it looks to allow the market to set the exchange rate.

How much money Bangladesh would have to pay will ultimately depend on the exchange rate at the time of payment.

In the proposed budget to be placed today, the debt servicing cost is likely to be $5.18 billion or Tk 57,000 crore, a 35 percent increase compared to the revised budget.

The debt servicing cost is increasing, and foreign funds are not being utilised fully. As a result, the net foreign financing has reduced.

The government had set aside $13.17 billion as foreign financing in the budget for this year, but it was later revised to $9.65 billion. Of the amount, $2.92 billion was earmarked as budgetary support in the original budget, and it was revised to $1.35 billion.

The new budget is likely to allocate $12.86 billion as foreign financing and $3 billion of it could be kept as budget support.

A top finance ministry official said the government had, in most years, failed to utilise the allocated foreign funds. The low use is another reason behind the decreasing foreign financing, according to the officials.

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[Saif]

What’s in the new budget?

The FY 2024-25 budget falls short of assessing the depth of the economically challenging time.

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What's in the new budget?

VISUAL: ANWAR SOHEL

Yesterday, the new finance minister presented the proposal for the national budget for FY2024-25 at a time when Bangladesh's economy is under tremendous pressure. The finance ministry deserves credit for undertaking the humongous task of preparing a budget during an economically challenging time. However, the proposed budget falls short of fully assessing the depth of the problem and making realistic targets, and thus suggesting practical measures to solve some of the problems.

How prudent is the fiscal framework?

With a size of Tk 7,97,000 crore, the FY2024-25 budget is equivalent to 14.2 percent of the GDP, which is the same as the revised budget of the outgoing fiscal year.

The gap between expenditure and revenue is large, which is common in Bangladesh. Since the revenue target is set at Tk 5,41,000 crore, or 9.7 percent of GDP, the government has to rely on both domestic and foreign sources. However, given the high inflationary pressure over the last two years and the resource constraints the country faces, it would have been prudent to keep the budget deficit low, somewhere between three or four percent of GDP, even though traditionally it has been set around five percent in the annual budget. In FY2023-24, the budget deficit was set at 5.2 percent of GDP, which has now been revised to 4.7 percent. In the upcoming fiscal year, it has been set at 4.6 percent. Of this deficit, 2.9 percent will be financed from domestic sources, and 1.9 percent from foreign sources.

A large amount of domestic funding will come from bank loans by the government, which is set to be Tk 1,37,500 crore—2.5 percent of the budget deficit. In the revised budget of FY2023-24, the amount of bank loans has been increased to Tk 1,55,935 crore. In the outgoing fiscal year, there was low demand for bank loans by the private sector. But the government's consistent dependence on the banking sector will create the crowding out effect for the private sector at some point. Besides, the government's interest payment against the bank loans continues to increase.

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[Saif]

Govt measures will tame rising inflation

Finance Minister Abul Hassan Mahmood Ali yesterday expressed hope that the government would be able to curb high inflation on the back of budgetary measures and the central bank’s steps.

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Govt measures will tame rising inflation
Says finance minister at post-budget briefing

Finance Minister Abul Hassan Mahmood Ali yesterday expressed hope that the government would be able to curb high inflation on the back of budgetary measures and the central bank's steps.

"I would like to remind you that after we assumed power in 2009, inflation was at a high level, but we brought it under control. I want to assert that inflation will fall this time too.

"We have taken several steps to control inflation through the tax structure. For example, duties have been reduced for the import of daily necessities."

The minister was speaking at the post-budget media briefing at the Osmani Memorial Auditorium in Dhaka.

Bangladesh has been seeing more than 9 percent inflation for the past two years. Though many countries have successfully brought it down, Bangladesh is struggling to contain it owing to a lack of adequate measures at the right time.

Mahmood Ali tried to allay fears that higher bank borrowing, targeted for the upcoming fiscal year, will stoke inflation.

"There is nothing to worry about," he said, adding that the government did not go for a bigger budget with an aim to rein in inflation.

"Since controlling inflation is our top priority now, contractionary policy remains the focus for a while. However, we will keep an eye to ensure our growth does not suffer too much from this."

In the budget speech, the finance minister said the goal is to increase government spending gradually in the second half of 2024-25, and this will be possible if the revenue collection increases.

Md Khairuzzaman Mozumder, secretary of the finance division, said there is distortion in the supply chain of essentials and the government is trying to address it.

"The policy rate has been increased to 8.5 percent, and it will take a while to see its impact."

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[Saif]

Bangladesh: a breakout economy or another LDC crash landing?

What Bangladesh achieved in the last five decades, more so over the last 30 years or so, has been more than impressive. We have been stepping up our gross domestic product (GDP) growth rates every decade consistently since the independence, culminating to 6-7 per cent pre-pandemic. If we take the f

thefinancialexpress.com.bd

Bangladesh: a breakout economy or another LDC crash landing?
ZAVED AKHTAR
Published :
Jun 04, 2024 23:25
Updated :
Jun 04, 2024 23:25

What Bangladesh achieved in the last five decades, more so over the last 30 years or so, has been more than impressive. We have been stepping up our gross domestic product (GDP) growth rates every decade consistently since the independence, culminating to 6-7 per cent pre-pandemic. If we take the first 50 years since independence, we have seen massive acceleration in the last 30 years with GDP doubling every 10 years, an unmatchable feat for any least developing country (LDC). During the period, Bangladesh has also seen strong acceleration of the Human Development Index (HDI), well ahead of India, Pakistan, and Nepal (albeit lower than Sri Lanka, Maldives & Bhutan) and is currently placed as Medium Human Development Category. In this connection, a quote from The World Bank Country Economic Memorandum, Change of Fabric, may be relevant. Regarding the reforms, it states: "In the mid-1980s, markets and public investment were strengthened, including for infrastructure. Further reforms in the early 1990s allowed for more private sector participation in trade, finance, and land ownership. These reforms were accompanied by complementary reforms in agriculture ((e.g., liberalization of agricultural input markets, seed sector reforms), and in social sectors (e.g., mandatory primary school, a female stipend program for secondary schools, and family planning programs). The rise of ready-made garments exports during that period evolved from a combination of private investment and public policy support. Structural improvements provided strong impetus to inclusive growth especially between the early 1990s and mid-2000s but major reforms have not been sustained since then. Bangladesh has yet to move to the next phase of economic transformation."

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​

 

[Saif]

New budget designed for plunderers: Fakhrul

New arrangements have been made in the proposed budget for fresh looting of the nation's wealth, said BNP Secretary General Mirza Fakhrul Islam Alamgir today

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New budget designed for plunderers: Fakhrul

New arrangements have been made in the proposed budget for fresh looting of the nation's wealth, said BNP Secretary General Mirza Fakhrul Islam Alamgir today.

Speaking at a discussion, he also criticised Prime Minister Sheikh Hasina's comment where she described the provision for whitening black money as "using bait for catching fish"

"How long will you (PM) be able to deceive people by creating a smoke screen with such statements?" he asked.

"Just by looking at the budget, you can understand that arrangements have been made for another feast of big fishes," the BNP leader said.

He said the new budget will do nothing but harm the country.

Fakhrul said the growing inflation is the biggest crisis for the common people as the skyrocketing prices of commodities have made their lives unbearable.

Jatiya Samajtantrik Dal (JSD-Rob) arranged the programme at Jatiya Press Club, marking the first death anniversary of Serajul Alam Khan, one of the key organisers of the Liberation War.​

 

[Saif]

Who will actually have to pay 30 percent income tax?

What is a progressive tax system? Well, it means that the income tax rate climbs up as the income increases. But that still doesn't mean that the raised income tax rate will apply for the entirety of someone's income

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Who will actually have to pay 30 percent income tax?

In the budget proposal on Thursday, finance minister Abul Hassan Mahmood Ali proposed that the marginal tax rate for the highest income slab would be 30 percent. While 30 percent income tax is a relatively high figure, as the tax rate for the highest income slab previously was 25 percent, it is important to consider the fact that Bangladesh has a progressive tax system, which means that in practice, most people will actually not be paying their income taxes at an effective rate of 30 percent.

What is a progressive tax system? Well, it means that the income tax rate climbs up as the income increases. But that still doesn't mean that the raised income tax rate will apply for the entirety of someone's income.

In this year's budget, it has been proposed that the first Tk 3,50,000 income any individual makes will be tax free. For the next Tk 1,00,000 that they make, the tax rate will be five percent. It will be 10 percent for the next Tk 4,00,000, 15 percent for the next Tk 5,00,000, 20 percent for the next Tk 5,00,000, 25 percent for the next Tk 20,00,000, and finally, 30 percent for whatever a person makes beyond this.

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[Saif]

Widening tax net urgent to raise tax-GDP ratio: ICAB

The Institute of Chartered Accountants of Bangladesh on Saturday said that widening the tax net was the demand of time to increase the country’s tax-gross...

www.newagebd.net

Widening tax net urgent to raise tax-GDP ratio: ICAB
Staff Correspondent 08 June, 2024, 23:23

The Institute of Chartered Accountants of Bangladesh on Saturday said that widening the tax net was the demand of time to increase the country's tax-gross domestic product ratio.

In a post-budget press conference organised by ICAB in the capital Dhaka, accounting professionals said that they appreciated the reduction of tax on private companies and one person companies, essential items and making tax rates applicable for two years in the proposed budget for the 2024-25 financial year.

Finance minister Abul Hassan Mahmood Ali placed the proposed budget for the 2024-25 financial year at Jatiya Sangsad in the capital Dhaka on June 6.

The institute said that the proposed budget gave an opportunity to legalise undisclosed money with a 15-per cent tax, but did not provide a distinction between legitimate and illegitimate incomes.

Mohammed Forkan Uddin, president of ICAB, said that the institution appreciated the emphasis put on online document verification system in the proposed budget.

The ICAB president also said that borrowing from internal sources to meet the budget deficit could fuel the already rising inflation.

He also said that ICAB appreciated the changes in the VAT and supplementary duty.

ICAB chief executive officer Snehashish Barua said that if the government took more loans from banks, investment in the country could reduce and higher revenue collection target might be disrupted.

Former ICAB president Md Humayun Kabir, among others, was present in the press conference.​

 

[Saif]

Import duty cut for LDC graduation: Long way to go for readiness

The government has proposed removing and reducing import duties and supplementary duties on 282 products in fiscal year 2024-25 as it continues its efforts to prepare the nation for its graduation out of the Least Developed Country grouping.

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Import duty cut for LDC graduation: Long way to go for readiness

Visual: Biplob Chakroborty
The government has proposed removing and reducing import duties and supplementary duties on 282 products in fiscal year 2024-25 as it continues its efforts to prepare the nation for its graduation out of the Least Developed Country grouping.

Experts, however, say the moves are inadequate and the government is leaving a lot to do before the country graduates in 2026.

In the current fiscal year, it withdrew import duties on 191 products and supplementary duties on 234 products.

Next year, it wants to withdraw supplementary duties on 19 more products and reduce supplementary duties on 172 and withdrawal duties on 91 others.

Once Bangladesh graduates in November 2026, it may lose yearly $8 billion worth of exports to erosion of trade preferences.

Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), said the measures for dealing with the post-graduation challenges were inadequate.

He said the government was cutting supplementary duties, regulatory duties and has recommended further duty cuts on a few products and their number was not big.

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[Saif]

What are we doing wrong in attracting FDI?

What can we do better? Why is Vietnam successful and not us?

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What are we doing wrong in attracting FDI?

Foreign Direct Investment (FDI) is the holy grail of this century. Every country seeks to draw FDI and increase its share of this rare commodity. Readers need no reminder that FDI is a limited resource and is traded in a competitive market since all countries, including the significant players—Ireland, India, China, and the USA—are contenders in this chase.

Vietnam, which broke out of the clutches of foreign control only in 1975, has emerged as an economic powerhouse thanks to the influx of FDI. We can learn a lot from the path it charted out for itself since Bangladesh is strategically located in the same region with the potential to leverage not only its domestic market potential but also its proximity to India and China to become the next hub of the international supply chain, including electronics, textiles, IT, and pharmaceuticals. Once they relocate to Bangladesh, these industries could export from here, serving global markets in pharmaceuticals, technology services, medical devices, food and beverages, and financial services.

The question on everyone's mind is whether the recent troubles in our economic front will hurt our chances of attracting FDI. The recent budget has incorporated no new measures to make FDI more attractive to investors. The Fitch ratings downgraded Bangladesh's sovereign credit rating (SCR) to B+ from BB-. That will impact FDI, in addition to driving up the cost of borrowing.

The SCR downgrade did not surprise anyone, but I wanted to know what factors caused this downgrading. Does it matter to us? And how consistent have the ratings been in identifying the potential risk to investors? I wanted to find out if these credit rating agencies have considered all the information available, including political, social, economic, environmental, and financial issues. As I was exploring, I discovered that a lot of emphasis, or weight as they call it in technical jargon, is assigned to the foreign exchange balance, financial stability, and, of course, the mood of the investors in the country itself. It is also known that building stronger FDI links with the local economy through supplier development programmes and FDI linkage initiatives help decrease information gaps for investors and boosts local business opportunities.​

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[Saif]

Economic immorality called out

Bangladesh is heading towards an economic system devoid of moral values, which is causing a breakdown in financial discipline, spoiling the business climate, and discouraging honest taxpayers, said noted economist Wahiduddin Mahmud.

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Economic immorality called out
Economists paint a grim picture for Bangladesh at discussion

Bangladesh is heading towards an economic system devoid of moral values, which is causing a breakdown in financial discipline, spoiling the business climate, and discouraging honest taxpayers, said noted economist Wahiduddin Mahmud.

He was one of the speakers who took part in a discussion on the proposed budget for the fiscal year 2024-25 at a city hotel yesterday.

The Editors' Council and the Newspaper Owners' Association of Bangladesh (Noab) organised the event.

Wahiduddin observed, "We are talking about being a Smart Bangladesh. If smart people have no values, it becomes horrifying.

"How we can restore the values in the economy should be analysed and focused on."

Citizens too have a responsibility, as many engage in corruption to evade taxes or get benefits by bypassing rules and procedures, he added.

Wahiduddin, also a former finance adviser to a caretaker government, said the main source of this economy devoid of values is the political power system. When the power illegally goes to the loyal people and vested groups, it is used for immoral activities.

In the interest of the economy, the government must keep some sectors free from corruption and irregularities, he said.

The administration lacks accountability, and corruption is deeply rooted there, which wastes public funds, said Wahiduddin, also a former professor of economics at Dhaka University.

He said the Bangladesh Financial Intelligence Unit (BFIU) has failed to play its due role in curbing money laundering. "Recently, we have seen that a former government official kept hundreds of crores of taka in banks and then withdrew it too. But nobody was caught."

He said if Tk 10 lakh is transferred via banks, the BFIU notices it and is supposed to detect the source.

"The atmosphere for confidence has not been created. We see unbridled circulation of black money in the economy and capital flight."

Wahiduddin said when the economic indicators were strong, the irregularities, mismanagement, and waste were covered up. "It [the economy] had the capacity to absorb those. At present, it has no capacity to absorb this mismanagement."

The current economic crisis is not temporary, and mid- and long-term strategies are needed, he warned.

Citing mega projects, the economist said those were built with loans. He said some of them could have been built with equity sharing. "Then, it might have eased the pressure of debt repayment."

Wahiduddin said the economy is facing the challenges of stubborn inflation; erosion of foreign exchange reserves; lower revenue collection; lukewarm growth in remittance and export earnings; capital flight; indiscipline in the banking sector; massive corruption; and waste of public funds.

"In this situation, the budget was as usual … which can be termed a sacrificial lamb that has no significant scope to do the many things that are required."

Due to lower revenue earnings, there is no scope for a budget with high expenditure, which the country requires. Considering the high inflation, the government had to contain the deficit too, he said.

In overall macroeconomic management, some basic weaknesses have been exposed.

He said low revenue collection was a big weakness, but the government has not taken any strong corrective measures.

Another weakness is the huge loans taken from internal and external sources. "If the government continues to borrow, the budget may fall into a debt trap."

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[Saif]

Bangladesh economy to grow 5.7% in FY25: WB

The World Bank's prediction is much lower than govt projection of 6.75%

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Bangladesh economy to grow 5.7% in FY25: WB
The World Bank's prediction is much lower than govt projection of 6.75%

Bangladesh's economy is likely to grow 5.7 percent in 2024-25 fiscal year, much lower than the government's projection, supported by increased private consumption for easing inflation and a pick-up in overall investment for implementation of large investment projects, the World Bank said today.

"Shortages of inputs and imported goods are expected to ease gradually. A more flexible exchange rate policy is envisaged to help increase remittance inflows and reduce balance of payments pressures," the multilateral lender said in its Global Economic Prospects released today.

The outlook by the WB comes couple of days after the government, in the budget for FY25, projected a 6.75 percent growth of the gross domestic product -- the final value of goods and services produced in an economy in a certain period -- for FY25.

The WB's forecast is roughly one percentage point lower than the government's target for the year. The Washington-based agency in April predicted 5.7 percent growth for Bangladesh's economy for next fiscal year and it kept the projections unchanged in the latest report.

The agency said overall output would expand 5.6 percent in the FY24 ending this June.

The Bangladesh Bureau of Statistics (BBS) provisionally estimates GDP growth at 5.82 percent for FY24.

The WB said industrial activity was disrupted in Bangladesh partly due to ongoing import restrictions, which have caused shortages of materials and intermediate goods.

"The government consumption and investment have supported activity, while elevated inflation has dampened real wage growth and the purchasing power of households, and weighed on private consumption," it said in its Global Economic Prospects.

"Additionally, higher borrowing costs have weighed on demand. High levels of non-performing loans in the banking sector dampened investor confidence."

The multilateral lender raised its global growth outlook on Tuesday on the back of resilient consumer spending in the United States, but warned that growth remains weak by historical standards, reports Reuters.

In updated forecasts, the Washington-based development lender said it now expects the world economy to grow by 2.6 percent this year in real terms, up 0.2 percentage points from its last update in January.​